RAPAPORT... You don’t have to be in China to sell to Chinese people.
That’s the message from luxury marketing experts, who point out that tourists,
students and immigrants from the world’s largest fine-jewelry consumer have a
huge impact on the retail sector in Western countries.

“The joke in the high-end luxury-goods community is that if
you want to start a new luxury brand, the place to put it is where Chinese
tourists go,” says Marty Hurwitz, CEO of US-based research group MVI Marketing.
“Chinese tourists and their spending power in the US — particularly in the
major population centers — are driving brand growth in many categories, but
certainly in jewelry.”

Large jewelers from the greater China region know this, and
have been launching stores in North America to capitalize on local demand from
consumers who already recognize these brands. In 2016, both Chow Tai Fook and
Luk Fook opened stores in Flushing, New York, a neighborhood with a large
Chinese population. Luk Fook also has stores in San Francisco, California, as
well as in Canada. Expats are “actually driving a lot of luxury spending now,”
Hurwitz notes. Hong Kong-based retailers’ expansion into the American market is
“a really solid strategy, because there are pockets of [established] immigrants
[with disposable income] that have very high levels of spending power in the
US.”

There were 2.3 million Chinese immigrants in the US in 2016,
up from 1.2 million in 2000 and 1.7 million in 2010, according to Migration
Policy Institute, a Washington-based think tank. Their biggest population hubs
were New York, San Francisco and Los Angeles, notes the organization, adding
that Chinese expats are twice as likely as US-born Americans or other
immigrants to have a graduate or professional degree, because many of them
arrived as college students or highly skilled workers.

Study partners

Other Western markets have seen a similar phenomenon.
High-spending Chinese students in the UK number about 95,000, with each of them
receiving an average of 3.3 visits per year from family members, reports
Anglo-Chinese digital-marketing agency Emerging Communications. Those students
then act as retail tour guides, showing their relatives where to buy things.
The total number of Chinese tourists in British locations is higher still.

“Rather than taking the large step of establishing a
presence in mainland China in order to sell to the growing millennial audience,
it is possible to enter the market in a relatively easy and modular way by
targeting the half-million wealthy Chinese tourists that visit each year, the
vast majority of which are millennials focused on buying,” explains Emerging
Communications CEO Domenica Di Lieto.

On their terms

However, retailers have to get it right when selling to
Chinese people, whether in China or elsewhere. Chinese millennials can easily
distinguish between brands that are really dedicated to attracting their
business, and those that just want to make money fast, says Di Lieto. They hate
clumsy translations, overly direct promotions, and marketing that makes
presumptions about buyers.

“There have been some very big British names that have
arrived in China and assumed that doing what they do elsewhere will work,” she
adds. “Brands ranging from [large UK supermarket chain] Tesco to [fashion
designer] Paul Smith quickly learned the hard way that no matter who you are,
you have to do things the Chinese way when selling to Chinese consumers.”

Upmarket London department store Harrods was much more
successful with Chinese tourists because it realized it had to play on the
consumers’ terms, Di Lieto continues. Years ago, the retailer carried out
research and discovered that Chinese consumers visiting the UK were not
familiar with the brand — the first time it had found such broad-scale
unawareness of its name in the global market.

Since then, it has developed Mandarin mobile apps for its
London store, begun accepting Chinese credit cards and payment through WeChat
and Alipay, hired Mandarin-speaking store assistants, and started conducting
tours in the language. It also uses Alipay’s localized marketing tools to send
automatic messages to consumers who are near the store, Di Lieto says.

“Harrods…understood it had to attract Chinese consumers and
serve them on their terms, and as a result, the average purchase spend per
tourist is now more than GBP 2,000 [about $2,610],” she states.

Social life

Chinese consumer behavior is already changing retail in a
way many people may not believe, according to MVI’s Hurwitz.

Mobile shopping is much more popular among Asians than among
Americans, so much so that jeweler Michael Hill has staff members in its New
Zealand stores who are exclusively selling via social media platforms such as
WeChat, he reports. And they’re bringing in good money in the process.

“These consumers are making remarkable, thousand-dollar
purchases with just an image from the sales rep,” Hurwitz notes. “It’s
brilliant. I don’t think that’s happening quite as much in the US, but clearly
an immigrant population in the US has more purchasing power, [and] I expect
that will happen more. In my family, we’re certainly doing more of that.”

US retailers looking for an entry into the Chinese market
can start at home — but they can only succeed if they truly know their target
audience.

Season’s readings: What US jewelers can expect for the holidays

This holiday season will be better
than many previous ones due to strong consumer sentiment — but only for
retailers that innovate, according to MVI Marketing’s Marty Hurwitz. There’s
also less pressure to discount compared with previous years.

“The economy is quite strong;
consumer spending is starting to edge up nicely,” he notes. “I believe that all
those that have survived jewelry retail — that’s not everybody, but those that
have survived and are inventorying new product this year, not old product — will
most likely do well. That includes upper-end luxury.”

The trade war with China is
contributing to increased awareness of American-made jewelry, especially in
smaller US cities, he continues. (In larger population centers, demand is more
down to price.) An upsurge of women artisanal designers and manufacturers, as
well as female self-purchasers, has helped drive that trend. Consumers are even
willing to pay a premium for products originating in the US, Hurwitz adds.

The interest in US-made products
and branding, MVI research suggests, “began even before the tariff situation
evolved, but has been expedited because of the tariff issue being so prominent
in the news these days,” he explains.

In the fashion-jewelry segment,
price pressure is leading retailers to offer more silver as settings for
diamond items, and more lab-grown melee is appearing. “We’re seeing the diamond
market continue what has been an ongoing trend [toward] lower price points. I
think this is mostly to get to self-purchasing females.”

Meanwhile, he predicts, those who
have strong omni-channel capabilities will sell goods. Jewelers often say
consumers mainly do research online and make the purchase in-store, but it’s
not clear if that’s true, Hurwitz adds.

“There are websites that are ringing
their cash registers in $1,000-plus sales, in $10,000-plus sales — not just in
jewelry, but in a lot of different products,” he says. “There are plenty of
consumers spending plenty of dollars in e-commerce. There are also many
consumers doing research online and going into the store. There’s no one
answer; that’s why you have to have an omni-channel strategy.”